New Report Ties Larry Sonsini, Steve Jobs to Backdating Scandal

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New Report Ties Larry Sonsini, Steve Jobs to Backdating Scandal

Last summer, the widening options backdating scandal enveloped one of Silicon Valley's most eminent law firms, Wilson Sonsini. Reporters at the* The Recorder*, a California legal newspaper, found that the law firm had represented at least half of the 32 Silicon Valley companies that were implicated in the scandal by giving curiously well-timed stock option grants to their executives. But the evidence against Wilson Sonsini and its founder, Larry Sonsini, remained fairly circumstantial–until now.

Yesterday, Justin Scheck of The Recorder reported on new evidence that ties Sonsini much more closely to the backdating. A semiconductor maker, KLA-Tencor, has restated earnings to the tune of $370 million on order to account for backdating during the period when Mr. Sonsini was the company's corporate secretary. In other words, he should have known.

Even more damning, Sonsini's signature – along with that of Apple CEO Steve Jobs – is on paperwork authorizing backdated options grants at Pixar, according to sources cited by The Recorder. And a 2004 memo from a Wilson Sonsini lawyer that the SEC has obtained refers to KLA-Tencor "using the time machine to pick low strike prices."

Other events have already tarnished the formerly platinum-plated Sonsini reputation.

The firm's roots run deep into Silicon Valley, and over the 40 years that he's been practicing law here, Larry Sonsini has represented a laundry list of Bay Area tech giants: Silicon Graphics, Sun, Apple, Netscape, Google, YouTube.

In a Fortune profile last year, Sonsini was not shy about his role in shaping Valley culture. "We started to develop the recipe for how to build companies." The recipe? Entrepreneurs, capital, and corporate infrastructure – with a dash of legal services from Wilson Sonsini. "I was becoming a piece of the recipe," Sonsini said then.

As part of the recipe, Wilson Sonsini was in a good position to take equity in its clients, which made Sonsini and his partners very rich, and placed Wilson Sonsini lawyers on the boards of many of the Valley's biggest companies. So a lot of people were justifiably sceptical to read the news last year that the firm was preternaturally free of any connection with the widespread – one might even say ingrained – practice of granting backdated options.

As for Jobs, he has so far – narrowly – managed to avoid being implicated in backdated options that were granted to him at Apple – a grant that was made with the advice of Sonsini, according to The Recorder. But if it turns out that Jobs really did sign backdated grants at Pixar, he may not be so lucky this time around.